UNITED STATES v. ALL FUNDS ON DEPOSIT IN GREAT EAS

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK

August 28, 1992

UNITED STATES OF AMERICA, Plaintiff, against ALL FUNDS ON DEPOSIT IN GREAT EASTERN BANK ACCOUNT NUMBER 11008117 IN THE NAME OF HADSON TOKO TRADING CO., a/k/a HADSON TOKO TRADING CO., INC., a/k/a HADSON TOKO TRADING CO., LTD., Defendants.

In this case, the United States seeks forfeiture of the defendant funds pursuant to 18 U.S.C. § 981(a)(1), which authorizes forfeiture of property "involved in a transaction or attempted transaction in violation of sections 5313(a)
*fn1"
or 5321
*fn2"
of Title 31 . . . or any property traceable to such property."

As the Report and Recommendation of Magistrate Judge Caden correctly notes, the government has established probable cause to believe that deposits made into the frozen account were structured in violation of 31 U.S.C. §§ 5313 and 5324. See United States v. Nersesian, 824 F.2d 1294, 1314 (2d Cir. 1987). Indeed, claimant is willing to concede, for purposes of this motion, that structuring violations took place. The government, however, must still establish that all the seized property was involved in a transaction or attempted transaction in violation of Section 5324. 316 Units of Municipal Securities, 725 F. Supp. at 179 . The government has not demonstrated any nexus between the alleged violations and the entirety of the funds currently on deposit in the frozen account, see United States v. Property at 4492 S. Livonia Rd., 889 F.2d 1258, 1269 (2d Cir. 1989), nor has the government sought to trace the funds to the proceeds of illegal activity, see Banco Cafetero Panama, 797 F.2d at 1159.
*fn3"
Rather, the government argues that the entire current balance of $ 51,563.40 is forfeitable under a facilitation theory.

Nonetheless, the government argues that the facilitation theory can be extended to violations of the reporting requirements. The government contends that in prohibiting structuring, Congress was simply eliminating a loophole used by money launderers to subvert the reporting requirements and accordingly the facilitation theory was properly applied in the circumstances presented here. See Comprehensive Money Laundering Prevention Act: House Report from the Comm. on Banking, Finance & Urban Affairs, H.Rep. No. 746, 99th Cong., 2d Sess. 21 (1986). This Court disagrees. The seizure of the funds currently in the subject account cannot be justified on a facilitation theory. The cases relied upon by the government, Bank of New York, 769 F. Supp. 80 and All Monies ($ 447,048.62), 754 F. Supp. 1467, involved allegations of violations of Section 1956, i.e., concealing the proceeds of unlawful activity, not simple structuring of transactions to avoid reporting requirements. Although the Court agrees that the prohibition on structuring was enacted to inhibit money laundering, this case involves bare claims of structuring, not the concealment of the proceeds of illegal activity. The Court has difficulty understanding how the deposit of large sums of money for which a CTR must be filed facilitates structuring and the avoidance of reporting requirements. The purpose of structuring is to hide large sums of cash by engaging in repeated small transactions which need not be reported to the Internal Revenue Service. In this case, the disputed funds consist mainly of a single deposit of $ 48,384.77 for which a CTR was filed by Great Eastern Bank with the notation "Suspicious Transaction" checked off by the Bank. The government argues that by occasionally depositing large sums of currency and causing a CTR to be filed, the claimant deflects attention from the structured transactions. This makes no sense. In this instance, the deposit of the large sum of money resulted in the filing of a CTR with a notation of "Suspicious Transaction". Causing the filing of a CTR hardly serves to hide the structured transactions. If anything, it subjects the account to closer scrutiny and make it more likely that the government would investigate this "suspicious" account and discover the numerous transactions involving sums just below the reporting requirements.

As to the government's motion to amend its complaint, the Court adopts the findings of the magistrate judge and grants leave to amend consistent with the discussion above.

Conclusion

For the reasons stated above, claimant Hadson's motion to dismiss is denied, and its motion to vacate the warrant of arrest is granted except as to the amount of $ 6,340.00. The Government's motion for leave to amend is granted. The Clerk shall enter judgment accordingly.

SO ORDERED.

Dated: Brooklyn, New York

August 28, 1992

Carol Bagley Amon

United States District Judge

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